There is a very specific legal procedure to be followed when effectively transferring immovable/fixed property from an Owner to the Purchaser.
Immovable property cannot legally be sold or transferred without the parties entering into a written Agreement of Sale. The Alienation of Land Act 68/1981 (as amended) is the applicable legislation when it comes to selling/alienating immovable property.
Electronic signatures of an Agreement of Sale are not valid, unless the parties confirm in writing that they signed the document and accepts the terms thereof. Signature of an Agreement of Sale should therefore rather be in “wet ink”, i.e. the parties to the Agreement of Sale must sign the document in hand with ink and pen.
Once the Agreement of Sale is entered into and all the conditions are complied with, there is a procedure to be followed to effect transfer of the immovable property from the owner to the Purchaser.
The procedure is dictated by the Deeds Registries Act 47/1937 (as amended) or the Sectional Title Act 95/1986 (as amended), depending on the type of property being transferred, whether it be an erf/farm or a sectional title unit.
The terms of the Agreement of Sale must also be complied with. The Attorney attending to the transfer of the Property must act according to the instructions of the parties and also by considering the terms of the Agreement of Sale.
The Registrar of Deeds, in each jurisdictional area of South Africa is the duly appointed government institution mandated in terms of the above to Acts, to effect registration of Properties. The Registrar regularly circulates notes on how to practically manage certain situations, considering the applicable legislation.
Below is the normal flow of a property transfer procedure, i.e. the process which Attorneys follow, to make sure an immovable property is registered in the new owner’s name.
- AGREEMENT OF SALE IS SIGNED
- The parties enter into an Agreement of Sale for the Property. Normally an Estate Agent instructed to market and sell the property on behalf of the owner, negotiates the terms of the Agreement.
- The signed Agreement is then provided to the Attorney to proceed with the instruction to transfer the immovable property to the new owner.
- PARTIES TO SIGN TRANSFER DOCUMENTS
- Once all the suspensive conditions to the Agreement of Sale is fulfilled, the parties are called upon by the Attorney to sign transfer documents to effect transfer of the property to the new owner.
- CANCELLATION- AND BOND ATTORNEYS
- Just like a vehicle, an immovable property also has an “ownership document”, called a Title Deed. The Owner must provide the original title deed of the property, so that the transfer thereof can be affected to the new owner. –
In most cases the Owner’s property is bonded with a financial institution (e.g. Bank). The Bank does not own the Property, but keeps the original Title Deed of the Property, to ensure that the Owner first settles the debt, before the Immovable Property can be transferred to the Purchaser.
- If the current Owner of the Property still has a mortgage bond registered over it, the Conveyancing Attorney requests the settlement figures and uses the guarantees from the Purchaser’s new bond to be registered, to settle the debt of the Owner on transfer date.
No funds change hands prior to the Property transfer into the name of the Purchaser. The Conveyancing Attorneys arrange documents and guarantee to this effect, so that on date of transfer of the Property into the name of the Purchaser in the Deeds Office, the funds of the Purchaser is used to settle the Owner’s debt and the difference is paid out to the previous Owner.
- REQUESTING OF FINANCES
- Once settlement figures on the Owner’s bond are received and the Purchaser’s bond attorneys are appointed, guarantees for the bond approved amount are requested from the bond attorneys.
- Any deposits and costs are also collected from the Buyer. It can take anywhere from 1-4 weeks to obtain guarantees from the bond attorneys, for the matter to proceed.
- OTHER CONDITIONS
- There can be other conditions to the Agreement of Sale that must be complied with, for example; the Owner normally has a duty to supply the Purchaser with certificates of compliance that all the electrical installations in the property are according to code.
- Any condition that any of the parties must comply with in terms of the Agreement of Sale, is that party’s duty and responsibility and must be attended to in accordance with the terms of the Agreement of Sale.
- ATTENDING TO CLEARANCES
- Once the guarantees are received from the bond attorneys and/or payment of the balance of the purchase price/deposit is made, the clearances are attended to at the local municipality, managing agents (in case of sectional title units) and SARS. These clearances normally take 2 weeks, depending on the Municipality.
- LODGEMENT AND TRANSFER DOCUMENTS
- All attorneys, i.e. cancellation attorney, transfer attorney and bond attorney must link and lodge their documents simultaneously in the deeds office. The cancellation attorney and bond attorneys can only lodge their matters, once they have the go-ahead/proceed from the respective bank.
- REGISTRATION
- Once a matter is lodged, the Deeds Office takes about 7-10 working daysto complete the registration of the Property from the Owner to the Purchaser. On date of registration, the property is registered in the name of the Purchaser. The Purchaser’s bond is registered, and the Owner’s debt is settled and cancelled and the balance of the proceeds of the sale (after deduction of the settlement amounts) are released to the Seller.
WHAT CAUSES DELAYS IN THE TRANSFER PROCEDURE?
The Owner is deceased
When the owner of a property was a natural person and is deceased, the Master of the High Court of South Africa (a division of the High Court) together with the Executor appointed in terms of the deceased’s will, is responsible for the deceased’s assets. The Executor is the person appointed by the deceased in their Will, to act as their proxy to sign paperwork on behalf of the Owner, when that person dies.
The Executor must first be appointed by the Master of the High Court before he/she can sign and accept any offers on the Immovable Property of the deceased. An appointment letter is issued by the Master of the High Court to the Executor, to be able to act on behalf of the deceased.
If the property is sold by the Executor, the heirs of the deceased estates as well as the Master of the High Court, must consent to the property being sold and for which amount. The Master takes various factors into consideration when making this decision, but if the heirs of the estate consent to the sale, the Master will in most cases not object.
This process unfortunately ads about 2 -3 months to the transfer procedure above.
The Property is owned by a Developer
A Developer of a Sectional Title Scheme (e.g. block of flats, townhouse complex or some gated communities) must first complete building the unit. Once the unit is completed, final measurements will be taken by a Land Surveyor, so that the newly built unit can be created on a separate title deed for transfer to the Purchaser.
The Land Surveyor requires about 2 months to be able to measure, draft and obtain the specific plans, required for the registration process. The SG plans provided by the Land Surveyor are not the same as building plans. This time period is over and above the normal registration process.
The Owner of the Property is in financial trouble
If the Owner owes more on the property in property taxes, bank loans, levies and/or other expenses, than the sale price, then the Owner is required to settle the difference, so that the debts of the Property can be settled, for the registration of transfer to be effected.
In such an event, if the Owner cannot settle the debts over and above the sale price of the Property, the transaction cannot proceed without the Owner’s creditors consenting to the transfer of the Property. The Attorney approaches the creditors of the Owner to consents to transferring the property to the Purchaser without being paid the full outstanding settlement balance due to them. This process takes time and causes a delay in an otherwise normal transfer procedure.
The Owner is sequestrated/liquidated
If the Owner of the Property is either sequestrated or liquidated, then the liquidator to the insolvent/sequestrated estate of the Owner, must consent to the sale. The liquidator determines if the sale is in the best interest of all the creditors of the Owner.
This process can add an additional 6-8 months to the transfer procedure, because the liquidators have to consult with the other creditors to make a determination if the sale is to the benefit of the creditors.
Disclaimer: Although I am an attorney by profession, I am not YOUR attorney. This article is for informational and educational purposes only, does not constitute legal advice and does not establish any kind of attorney-client relationship with me. I am not liable or responsible for any damages resulting from or related to your use of this information.